Hard Money Loans: How long is the Financing Period?



How do you finance your short-term real estate investment projects? Hard money loans provide a quicker alternative to bank loans and are secured by real estate. These loans differ from traditional mortgages that run for 10 or 30 years.
Getting a conventional mortgage on vacant or distressed real estate is very difficult. As a result, these loans are often used by most real estate investors, especially for new acquisitions.

Here is an example:

A real estate investor stumbles upon an apartment complex that is being sold. It happens that the complex is vacant and in complete despair. We all know getting a mortgage on a vacant or distressed property is impossible. So, what can the real estate investor do?

This investor has two options:

  • Getting a loan from a friend, family member, or partner.
  • Getting a hard money loan to purchase the property. The money is also used to cover the expenses incurred when repairing the apartment complex.

After the real estate property is rehabbed and is ready for rental, the investor can get a conventional mortgage to repay the hard money loan.

Note that the credit isn’t envisioned as permanent traditional financing. Those new to hard money loans must remember to use the loans for short-term plays and not long-term holds.

Private investors (or their accounts) financed the loans, not conventional lenders like credit unions or banks. Usually, the terms are around 12 months, but the loan terms can be extended to longer terms of two to five years.  The borrower must pay monthly interest payments and a portion of the principal. The balloon payment is made at the end of the loan’s term.

The amount lenders can offer a borrower is often based primarily on the subject’s property value. Maybe the borrower owns the property and wants to use it as collateral, or it may be a property the borrower wishes to acquire.

Hard money lenders are not concerned about your credit records but the property's value. Borrowers who can’t get financing from credit unions or banks because of a recent short sale or foreclosure can still get a loan if they have adequate equity in the property used as collateral.

What is next?

Share it!

Check this out, Hard Money Loans: How long is the Financing Period? 

Want more Hard Money Loans content? Subscribe PaperFree  Magazine! 

We will email you the top content on this subject: Hard Money Loans , Real estate Property.

Copyright © 2023 PaperFree. All rights reserved.

Contribute Content

Start now

Investor Concierge
Free Consultation

Schedule now

Invest in long-life, high-quality assets around the nation.

multifamily investment strategy

Learn more

industrial real estate investment strategy

Learn more